Egypt int’l reserves hit record high in four years in April

Egypt’s NIRs reached their peak in 2020 before the outbreak of the COVID-19 in the country, recording $45.4 billion, before deteriorating due to the pandemic. They started to recover in 2022, reaching almost $41 billion, before declining due to the repercussions of the Russia-Ukraine war.

In its report on the country’s credit rating action, Fitch expected Egypt’s gross foreign exchange (FX) reserves to increase by $16.2 billion in the current FY 2023/2024 to hit $49.7 billion.

Fitch explained that this projection comes despite a four percent widening of the current account deficit expected during the current fiscal year to reach 5.2 percent of GDP due partly to lower oil and services exports, and a temporary boost to imports from the recent clearance of an estimated $8 billion FX backlog.

It also expected Egypt’s FX reserves to rise further to hit $53.3 billion (equivalent to 5.6 months of current external payments) by the upcoming FY 2024/2025, which starts on 1 July. Fitch forecast the country’s net external debt to fall by 6.5 percent from FY 2022/2023 through FY 2024/2025 to 23.2 percent of GDP.

Egypt’s debt hit 96 percent of GDP in FY 2022/2023 and started to decline to an estimated 92.5 percent of GDP in the current FY 2023/2024. It is expected to go below 83 percent in the upcoming FY 2024/2025, according to the estimations of the Ministry of Finance.

Egypt is set to witness FX inflows over the coming years as international financial institutions (IFIs) announced financing packages that aim to boost the country’s economy and replenish its FX reserves amid the impacts of the Israeli war on Gaza.

Moreover, Egypt signed its biggest-ever foreign direct investment (FDI) deal with the UAE in February, worth $35 billion, to develop the coastal zone of Ras El-Hekma. According to the deal, Egypt receives $24 billion in cash flow, while $11 of the UAE deposits at the CBE are to be directed to the project’s related investments. The project, which is set to commence in 2025, is expected to attract a further $150 billion in investments, while Egypt retains 35 percent of the project.